Free cash flow (FCF) is an important metric for evaluating Chevron
(CVX). That outlook is a bit muddier today than a couple of weeks ago, I’d wager.
The company’s cash flow from operations fell to $9.7 billion from $15.3 billion
a year ago. That whoopee cushion goes off amid a backdrop of complicated
details. Worth saying Chevron's blurt comes on a day when the S&P 500 enters 10% correction territory - this happened to Nasdaq yesterday.
Chevron bought Hess Oil this week, a few days before missing
performance estimates in earnings report. The purchase is meant to improve cash
flow per share accretion, higher distributions to shareholders (dividends] and
is said to enhance and extend production and free cash flow growth outlook into
the 2030s. The stock market may not be ready to look into the future on this
one, especially because today’s report tells of missed deadlines and cost
overruns in projects in the Great State for Texas[wastewater and fracking
problems] and the Great State of Kazakhstan [in the latter case, taking $1B off
of guidance]. Blame for K oops? “Rosy previous estimate.” This doesn’t bode
well for ROE, another important measure. Or faith in management, another
important measure. The Hess purchase almost looks like a feint meant to offset
the quarter’s bad news. What Hess buys Marathon is output from the Great State
of Guyana.
https://www.chevron.com/newsroom/2023/q4/chevron-announces-agreement-to-acquire-hess
Kazakhstan Blues combined with news of weaker than expected
earnings and delays sent shares lower. This resulted in a loss of $17 billion
in market cap. Morningstar is sticking with its $172 per share fair value [+17%].
This is an attempt to upgrade and diversify Chevron's
already diversified. It is important in one way: Depletion and restocking of oil reserves is an important issue for oil producers. This isn't particularly popular either, the price is high.
Tho it is a stock deal and lost a lot of mojo as a result of this week’s
Chevron pullback. They say it will pay off accretive Ly in 2025. The deal will
increase Chevron's debt load it doesn't seem to boost confidence in the
management let it come down. Stock lost 15% In five days even as it had been
buoyed by the two edged sword of Israeli Gaza. War. Slump is already cut 6.5
billion from the Hess Deal. Is that now under question? Oil prices rallying and
falling back on a daily basis - proving oil is a very volatile mixture. This
sudden plunge in major S&P player was a surprise to your intrepid reporter.
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| Chevron moved up from July to October then fell with a thud. If it finds a way to move up people will sell all along the way. |